What happens when your student loans default?
People sometimes take lightly the repercussions of not paying their student loans. The government has many drastic tools in their arsenal to use to those that avoid loan payments. They are quite a few things you can expect if you are default on your student loans.
Any tax refund that may be coming your way can be intercepted by the I.R.S. The I.R.S takes these tax refunds from your income tax if you fail to pay for your student loans. This is a favored method by the government in that it collects hundreds of millions of dollars annually. Challenges can be made to tax refund offsets in which legal actions can be taken.
The government can ‘garnish’ your paycheck. That is, government can acquire portions of your paycheck to resolve your loan I default. Government is allowed by law to take up to 15%. However it cannot take more than 30 times the current minimum wage. You can also legally object to your paycheck being garnished. You can contact a local law firm for more information. You can also avoid garnishment by contacting your creditor so you can organize a repayment of your loan.
Failing to pay for student loans can lead to some of your federal benefits being stripped from you. Government can take away some of your benefits such as social security, retirement and even disability benefits that you may possess to reimburse student loans.
Or government can do it the all-American way and sue you for the loan accrued. Private lenders as well can file for a lawsuit for default loans. There is no time limit for the collection of student loans therefore you can be sued indefinitely. This can be very stressful being taken to court by the government. You’ll have to pay for a lawyer which will be added cost if you lose the lawsuit. There is not much you can do to defer a lawsuit by the government, so this method can be very difficult for you when your student loan is default.
To conclude, those are the main tools used by the government to retrieve outstanding loans. It is wise if you are not in debt to consolidate your monthly payments so you can better manage it. Also setting a budget and having an estimate of the expenses accrued can also be helpful in managing your debts.
If your student loan has defaulted you should contact the Department Of Education’s Ombudsman. He may be able to guide you through the steps of resolving your debt.
